Financial Management for Budget HoldersJanuary 2015

Contents

• An overview of NHS Structure

• Who we are and what we do

• An overview of NHS Finance

• Budget holder responsibilities

• Budgeting

• Forecasting

• Interpreting Finance, Establishment, Nominal roll & Group Finance

reports

• Raising Purchase Orders and Authorisation Limits

• Cost Improvement Programme (CIP)

• Audit

• Overview of Contracting and Commissioning

• Overview of Payment by Results (PbR)

• Overview of Service Line Reporting (SLR)

An overview of NHS Structure

Who we are and what we do

Chief Finance Officer

Gail Nolan

Deputy Chief Finance OfficerSusan Rollason

Associate Director of Private Finance

InitiativesSteve Noon

Associate Director of Finance

Corporate Services & Financial Governance

Alan Jones

Associate Director of Finance Operations

Antony Hobbs

Associate Director of Finance

Contracting and ServiceLine Reporting

Craig Cook

Head of Financial Planning

Jonathan Gamble

Private FinanceInitiatives (PFI)

Team

Financial Services Teams

Financial Management

Teams

Contracting, Commissioning

and Costing Teams Financial

Planning Team

Director of Performance &

Programme Management Office (PPMO)

Jonathan Brotherton

Performance & Programme

Management Team

An overview of NHS Finance

Do you know…….

• The age of the NHS?

• How many employees work in the NHS?

• The size of the NHS budget?

• How many organisations are in the NHS?

• What UHCW’s total budget is?

• How many patients are treated by the NHS in a 36 hour window?

http://www.nhsconfed.org/resources/key-statistics-on-the-nhs

Budget Holder Responsibilities

• Understand and manage your budget

• Keep finance managers up to date with developments and issues

• Identification of efficiencies (CIP) & cost pressures

• Participate in budget setting and forecasting

• Validate financial information (e.g. nominal roll, establishment, reports)

• Operate within financial policies

What is a Budget?

• It is a ‘plan’ or envelope of resources required to deliver an agreed level of output.

• Usually the first year of an agreed 3-5 year plan and are determined by the amount of income a Trust earns.

• Budgets allow improved financial planning and monitoring of performance against the plan.

• A typical financial plan includes:

- Pay budget (£’s and WTE)

- Non Pay budget

- Income target

What is a Forecast?

“The use of historic data to determine the direction of future trends.”

Benefits

• Provides a forward look of resources & spend

• To identify and reduce risks

• Allows valuable decision making

• Aids budget setting

What information should budget managers provide?

• Predicted changes in their services

• Upcoming pressures

• Up to date recruitment plans

1. Suggest examples to be included in a forecast;

- Pay

- Non pay

- Income

2. What are the possible impacts of an incorrect forecast?

Stop and Think

Interpreting Finance Report

Interpreting Nominal Roll

Interpreting Establishment Report

Interpreting a Group ReportFinance Report – as at Month 4 - 2014/15Income and Expenditure – Group 'X' Summary

Group XPlan

Forecast Outturn

Variance Plan Actual Variance Plan Actual Variance

£000 £000 £000 £000 £000 £000 £000 £000 £000

IncomeContract Income 0 0 0 0 0 0 0 0 0Income from Activities Income From Activities120 35 (85) 61 12 (50) 20 3 (17)Other Operating Income Other Operating Income1,107 1,188 81 369 403 34 92 106 13

Total Income 1,226 1,223 (4) 430 414 (16) 112 109 (3)

Operating ExpensesPay (21,316) (22,620) (1,304) (7,317) (7,499) (182) (1,742) (1,896) (154)Non Pay (9,249) (9,365) (116) (3,141) (3,131) 9 (752) (810) (59)

Total Operating Expenses (30,565) (31,986) (1,421) (10,458) (10,630) (173) (2,494) (2,707) (212)

Group Position (29,339) (30,763) (1,424) (10,027) (10,216) (189) (2,382) (2,598) (216)

Memorandum

CIPs 3418 2006 (1412) 514 376 (138) 347 153 (194)

2014/15 Year To Date Month

1. Reading the budget reports, can you spot the issues and suggest possible reasons for the variances?

2. Reading the establishment, can you spot the issues and suggest possible reasons for the variances?

3. Reading the nominal roll, can you spot the issues and suggest any possible solutions or reasons?

4. Discuss the Group Finance Summary. Why is the position getting worse in the latter part of the year?

Stop and Think

Raising Purchase Orders

The Trust’s Standing Financial Instructions (SFIs) state all goods and services require an official order

• Orders can be raised (in order of preference) via:

− Integra

− NHS Supply Chain

− Requisition form

• Process:

- Complete order prior to commencement of service

- Obtain authorisation and forward to Supplies

• An SFI waiver must be completed for orders more than £10,000

For further assistance, contact Supplies Department

Authorisation Limits

Scheme of Reservation & Delegation

All budget holders should be aware of their authorisation limits

Delegated levels List of Officers Limits

Level 4 officers Trust officers (budget holders) £10,000

Level 3 officers Modern matronsGeneral managersService managers

£10,000 to £49,999

Level 2 officers Clinical DirectorsDirector of Pharmacy (pharmaceuticals)Head of corporate departmentsDirect reports to an executive director#

Director of Operations (Pathology)Associate/assistant directors

£50,000 to £99,999

Level 1 officers Executive directors# for their own departments/areas £100,000 to £499,999

Executive directors# £500,000 to £999,999

Chief Executive Officer with Chief Finance Officer Over £1,000,000

For further assistance please contact your finance team

Cost Improvement Programme (CIP)

Demand for NHS services is rising and funding is not increasing

at the same rate.

NHS needs to save £20bn by 2015

UHCW’s target for 2014/15 is £33.5m.

Groups are monitored on a weekly basis on:

- Value of opportunities identified

- Forecast delivery

Group’s responsibilities are to:

- Identify and deliver efficiency schemes such as reducing

waste, increasing income and productivity

- Regular meetings with your finance team to monitor

progress

Stop and Think

1. Can you suggest a possible CIP for;

- Pay?

- Non Pay?

- Increases in Non contract Income?

Audit

Internal and External Audit are key elements in every NHS organisationsGovernance Framework.

• Internal Audit ‘provides independent assurance to an organisation that its risk management, internal control and governance are operating effectively and helping it in achieving its objectives’.

• External Audit ‘carry out annual check on organisation’s accounts and give an opinion on whether they give a true and fair view of the financial position’ .

Overview of Commissioning and Contracting

Who’s involved?

• Commissioners – Clinical Commissioning Groups (CCGs) & Specialist Commissioning Groups (SCGs)

• Healthcare Providers – Trusts (e.g. UHCW)

Roles & Responsibilities

• Both parties agree ‘volumes’ and ‘budgets’ for patient care as part of an annual planning process.

• Consider size and demographics of the population

• Agree funding of new service developments.

For further information contact the Commissioning Team

Overview of Payment by Results (PbR)

• Money follows the patient

• Hospital services are paid for by either a locally agreed price or the national tariff

• Prices and payments are based on the type of procedure and appointment type (day case, outpatient, emergency)

• Adjustments are made depending on the complexity of care e.g. length of stay.

• Further incentives for meeting best practice and quality indicators – Commissioning for Quality and Innovation (CQUIN) – penalties if not met

– Quality, Innovation, Productivity and Prevention (QIPP) – admission avoidance schemes

For further information contact the Contracting and Commissioning Team

Overview of Service Line Reporting (SLR)

“SLR is a measure of the profitability of a service.”

• Measured at either;

- Group

- Specialty

- Consultant

- Healthcare Resource Groups (HRG)

- Point of delivery

- Patient level (PLICS)

• Income generated less the costs of delivering the service including overheads.

• UHCW reports this information using a system called ‘Qlikview’

For further information contact the Costing Team

Example of Qlikview / SLR

Example of Qlikview / SLR

Stop and Think

1. If we were to open an new ward, what do you think the impact will be on;

- Pay?- Non Pay?- Contract Income?

2. When might a hospital service not be paid?

3. What do you think are the benefits of SLR?

4. Money follows the patient therefore, what would you expect to see in a patient level costing?

Questions / Feedback

• Any questions?

• Please complete all of the feedback form

Financial Management Contacts

Finance Team GroupGroup Finance

AccountantDeputy Group

Finance AccountantFinance Lead

Group 04 - Emergency Claire Finn Louise Elliott Sean Price

Group 07 - Surgery Claire Finn Louise Elliott Sean Price

Group 09 - Women’s & Children’s Claire Finn Louise Elliott Louise Elliott

Group 10 - Ambulatory Services Claire Finn Louise Elliott Petya Ilieva

Group 14 - Imaging Claire Finn Louise Elliott Reena Savani

Group 05 - Neurosciences Paul Davies Kam Gill Gurdy Shoker

Group 06 - Oncology & Haematology Paul Davies Kam Gill Laura Perks

Group 08 - T & O Paul Davies Kam Gill Laura Perks

Group 13 - Care of the Elderly Paul Davies Kam Gill Sean Grant

Group 15 - Hospital of St Cross Paul Davies Kam Gill Sean Grant

Group 01 - Cardiac & Respiratory Pam Kaur Paula Wright Paula Wright

Group 02 - Renal & Acute Medicine Pam Kaur Mo Ali Victoria Merrett

Group 11 - Anaesthetics Pam Kaur Mo Ali Victoria Merrett

Group 12 - Theatres Pam Kaur Mo Ali Victoria Merrett

Group 16 - Clinical Support Pam Kaur Mo Ali Stephen Underwood

Group 31 – FinanceChris Moore Jo Treadwell Chris Moore

Group 20 - ET&R Chris Moore Jo Treadwell Chris Moore

Group 32 – Medical Chris Moore Jo Treadwell Chris Moore

Group 33 – Human Resources Chris Moore Jo Treadwell Chris Moore

Group 34 – Operations Chris Moore Jo Treadwell Chris Moore

Group 35 – Strategy Chris Moore Jo Treadwell Chris Moore

Group 36 – Core Nursing Chris Moore Jo Treadwell Chris Moore

Group 37 – Executive FunctionsChris Moore Jo Treadwell Chris Moore

PFI Group 19 - PFI Steve Noon Carol Casserly Steve Noon

Pathology Network Group 17 - Pathology Business Unit Kaly Johal Roger Miller Peggy Chukwusa

Finance Group A

Finance Group B

Finance Group C

Core/ET&R